APMEX vs. local dealer

I've been interested in coins since I was a little kid, and I'd like to get into the hobby more seriously now. Specifically, I'd like to buy some coins as an investment.

Now, don't get me wrong, I don't want to by 20 of the same coin and try to sell it a month later or something. I'd actually like to have a nice collection of coins that I like. I just can't bring myself to spend a decent amount of money unless I consider it an investment.

Since this is the case, I don't want to over-pay for coins. There is quite a nice local dealer by me, and I'd prefer to buy from him. I get to see the coins before I buy, I can talk with him and ask questions, I get what I buy right away, I don't have to deal with mail-order, cashier's checks, wiring money, etc.

The main problem is that my state (New York) charges sales tax, except on purchases of modern bullion coins over $1000. I'd rather get more collectible coins rather than modern bullion.

Because of this, APMEX looks like a good option. They seem to have very good prices, and no sales tax. I know everyone says to buy from a local dealer, even if the prices are higher, and I could understand that. I just can't justify the higher prices AND sales tax.

Is it really worth all the extra money to buy from a local guy?

Also, I only intend to buy PCGS slabbed coins. I don't really have time to become an expert on each type of coin I want to buy, and PCGS makes it easier to make sure I'm not getting ripped off.

Not that I think NGC isn't competant at grading coins, or is a bad company, I just think their slabs look absolutely hideous. I want a collection that I like to look at, and those white slabs ruin it for me. Of course, if I found a good deal, I could always get it crossed over. Does anyone else feel this way about the slabs?

Anyway, I bought a 1937 (I think) MS64 buffalo nickel at the dealer for $38, which was 3 over PCGS. With tax, $41.09.

Here's a few things I'd like to get:

A half dime. Doesn't matter which one, as long as it looks nice (MS), and is PCGS slabbed. I think it's cool that they made a coin so small.

A St. Gaudens double eagle. APMEX will sell a random-year MS64 for $850, or MS65 for $1335. This is quite a bit lower than the lowest price PCGS list. I'd see this as a well-diversified investment, since it has both bullion value and numismatic value.

A 1917 type-1 quarter, in the $300 range. It irks me that the US is so puritanical.

I'd like to get some Morgan and Peace dollars, since the PCGS index of them has come down a lot recently. I would like to get quite a few reasonably-priced ($100-300) ones.

I'd love to get a high-relief St. Gaudens some day, but I don't think I'll start with that. Kinda expensive.

Do you guys have any other suggestions for a new collector/investor?

Thanks.

 

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A few things right off the top----I don't have time right now to post everything..
DO NOT go by the PCGS price guide---it is hyped up to where its no good---use online auctions that are ended or the Gray Sheet.

As for PCGS and NGC slabs---don't limit yourself to one----you can get some great deals in NGC slabs cheaper than PCGS slabs---many people buy the HOLDER---that isn't a good idea.

Speedy

 

You're going to get a lot of different answers on this. I consider myself about 2/3 investor and 1/3 collector, so take that into account when reading my response, which is nothing but my opinion.

If your goal is "investment," then you should be purchasing gold and silver bullion coins for as close to spot price as possible. Buying high grade coins with large numismatic premiums is not investing in my opinion, and it had better be very psychologically satisfying and a lot of fun for you because there is no guarantee that it will be financially rewarding.

I think you're on the wrong track if the goal is investment and you should slow down before spending a lot of money, then regretting it. Read the posts from others which will inevitably follow this one. The people here are incredibly smart and know much more about numismatics than I do.

 

Firstly, I would say collectable coins are probably one of the worst investments possible for someone who is not very familiar with the numismatic market and market cycles. One of the most difficult concepts you will NEED to learn for a successful investment is to grade coins yourself and DO NOT trust the label on the plastic. This also applies to top tier third party graders, PCGS, NGC, and ANACS. Here are some examples of the same date, sold within ten minutes of each other, all in top tier slabs:
1861 NGC MS64 $299
http://coins.heritageauctions.com/common/view_item.php?Sale_No=417&Lot_No=8273&src=pr

1861 PCGS MS64 $345
http://coins.heritageauctions.com/common/view_item.php?Sale_No=417&Lot_No=8274&src=pr

1861 NGC MS64 $373.75
http://coins.heritageauctions.com/common/view_item.php?Sale_No=417&Lot_No=8275&src=pr

You'll see the PCGS Price Guide lists a properly graded MS64 at $435. This is clearly not the case, and the PCGS guide is typically way too high.

 

Welcome to the forum FM

 

Cloudsweeper,

Here's how I see it from an investment point of view...

First of all, I already have some bullion. But I don't consider it an investment. It is only a store of value. If a dime-worth of silver would buy a loaf of bread 100 years ago, and still buy a loaf of bread today, it didn't gain any value, only kept it the same. The precious metals market is quite volatile, with pretty much no potential gain (unless you listen to the goldbugs). It's a good diversifier if you use it to rebalance, but that's difficult because the transaction costs are high (for physical gold).

Second, I see a gold numismatic coin as very well diversified. If the economy goes down, it stores its value in the form of gold. If the economy goes up, it will increase in value, since collectors will have more money to buy coins with. The same thing could be accomplished by buying some of each (that is, buying some gold bullion, and also buying some numismatic coins without metal value). Again, to be diversified, I'll probly do some of each. I already have some bullion, and I'd like to buy some numismatic-only coins (such as Morgan dollars, and various other rare coins), as well as some combined (St Gaudens) type of coins.

Third, the PCGX CU3000 index has gained an average of over 12% per year since inception, which would be considered quite good for a mutual fund or similar investment. It also looks weakly correlated to the market, especially the more numismatic investments such as Morgan dollars. Those also appear to be weakly correlated with the price of precious metals. Less correlation is good from a diversification point of view, even if the volatility of the investment you're looking at is fairly high.

However, I am concerned about the lack of commoditization that Speedy points out, such as inconsistancy in grading, and lack of consistant pricing. The spreads also seem to be rather high.

This is another reason I like APMEX, they seem like they'll do a better job at these two things than my local coin shop. I'd think it would also help to buy some more common coins (such as Morgans and St Gaudens) with a large, liquid market, rather than more rare or obscure coins.

I will also use eBay to check prices, but it's a pain to buy larger quantities (dealing with all different sellers).

Learning to grade, and buying coins at prices not consistant with the grade on the slab seems more speculative to me, since I'm basically trying to have more knowledge than people who have been in this business for years and know all the tricks. It seems unlikely that I'd find an underpriced coin which the dealer, who has been looking at coins for decades, missed. I'm not really looking to become a dealer, or buy raw coins at shows, or out-guess people on ebay, or that type of thing. Looking at an MS64 nickel, I can't see any imperfections at all, even with a 10X loupe...

Maybe I'm barking up the wrong tree, but I always wanted to get some collectible coins.

 

Buy coins because you LIKE them---not for an investment---in most cases people who invest in coins will lose money---if you like the coin you won't really mind if it goes up or down.

In most cases I would say yes----get a local friend!

This is the mind set of most people---just becasue its in a PCGS holder does NOT mean you will be ripped off---you can be ripped off just as good with a PCGS slab as with a SGS slab.

Since you like this coin I would suggest that you start a collection of them---maybe one from each date...or maybe one from each date and mintmark....buy some books on them that are out there and learn everything you can about them.

That again shows that PCGS price guide isn't good...

But in most cases commom coins will always be commom coins...

More likely than most think---I've been collecting for about 6 years and have already cherry-picked some coins from dealers that have been in the hobby longer than I've been alive.

The thing is---when grading you have to look alot farther than just marks...you need to look at the luster/strike/detail/marks/hairlines/and such....and sometimes dates will change in such things....I mean a 1880-S Morgan Dollar will have a stroung strike and the detail is always great--so its not that hard to find anMS65....but now an 1880-O Morgan dollar is alot harder to find in MS65...becasue O mint Morgan Dollars are always weakly struck and so the detail isn't really good--its mushy and such....

For investment---Yes you are IMHO---I think under your skin you are really a coin collector ...let that pop out! and enjoy collecting coins!

Speedy

 

I don't want to steer this discussion off course, but in terms of the sales tax on coins in NY, you are, legally speaking, supposed to pay the equivalent of the tax if you get anything outside the state and bring it in. It's a "use tax" and it's Line 56 on your annual income tax form. No further comment on that (off) topic.

Now, to the main question. I am not at the point where anything I've bought would be considered to be "investment grade"-- the mintages are way too high and therefore the items are way too common. I actually look at getting zero back from the vast majority of what I/we own. That's not yet the point of the hobby right now for us (by us I mean myself, and our six year old daughter).

Were I to get to the level of buying really "collectible" coins (not that all coins aren't collectible!) I would really, really, really prefer to see them. I want to be able to hold the coin and take a good look at it. I'll get a reasonable price and I am confident that it won't be overgraded. And I am quite sure that the local dealer won't pressure me into buying it. I have gotten plenty of advice on my 20th Century Type Set including counsel that in fact my 1904-O Morgan is better than I think it is and that I really don't have to hurry to upgrade it. Furthermore, the store is established and has been in business for years. I expect it'll be around for a while as well. And the store supports the hobby in general and young collectors in particular, i.e. the ones who will be around to buy the coins when it's time for us to sell them. When it is time to move to the next level, I expect that I will be in that dealer's shop.

What does this do to the investment potential of the coin? Well, since I know I'm going to pay another x percent on top of the purchase price, it will necessarily be that much longer to wait before I can turn a profit. That's over and above the "instant discount" in value it will take once I take the coin out of the store, meaning the spread between sell and buy prices. For now, that's not a problem for me since I don't really regard the hobby as an investment vehicle, even if I were to suddenly turn away from the low end coins and toward the multi-digitally priced items.

 

FlyingMoose,

I forgot to welcome you, so welcome.

I understand that gold and silver bullion is really a cash substitute and not an investment. That isn't a negative in my mind. But also consider that for a coin with a high numismatic value in relation to the bullion, it must appreciate at a greater percentage rate than the bullion FOREVER to be a good investment. If I common silver coin rises from $10 to $20 because the price of silver goes up $10, its more expensive MS66 brother would have to increase from $100 to $200 just to stay even. It will have to increase more than 10X the increase in the price of silver to become an "investment." If it only appreciates 5X faster than the bullion price, it will be disappointing. Since coins don't generate an economic return like stocks and bonds, all numismatic premiums are speculative.

Another approach you might use is to ask your local dealer what he has that is high quality that would be very easy to sell back to him if the need arose. This might be a way to determine what you should collect. It won't necessarily be the common coins sold by APMEX. Or, you might like mint state half dimes, but if there isn't much of a market for them, the liquidity won't be there when you go to sell someday and the sell price will be disappointing. To have any chance at all of outperforming bullion, you will need to get out ahead of the coin market and buy what other collectors are going to want to collect too. I think a dealer can do that for you better than an internet site. I don't know what the sales tax is in New York, but you can lose 7-8% faster by buying less than best slabbed coins from discount internet dealers faster than you will paying the sales tax in order to get the dealer's expert advice. It sounds like you might be considering spending a fairly large amount of money on this, and if a dealer knows you are a potential substantial customer you'll probably get the first call for his best material [assuming he's a good businessman].

I would also completely avoid Ebay. If you buy from it, eventually you'll get burned. It's no place for a beginner to search for investment grade coins. Search some of the threads about Ebay on this site and you'll get a feel for the numerous problems involved.

Good luck.

 

Thanks for the welcomes Cloud and YNcoinpro.

Cloud,

You said it must appreciate at a greater percentage rate forever, but then your example is the exact opposite. $10 to $20 is a 100% increase, as is $100 to $200.

And, I don't see any reason for this not to be the case. Assuming the demand and supply stay the same, it should go up at the same rate as inflation (since people will have higher salaries, they'll be willing to spend proportionally more for the same items). However, the demand for old rare coins is increasing as more people get into the hobby, while the supply is decreasing as coins are lost, destroyed, or squirreled away by collectors. This should cause the prices to rise at a rate greater than inflation.

Now, this will not be the case if either less people are collecting coins, or if collectors start paying less for the same coins. This seems unlikely, but is possible.

For the half-dime, I'd like one nice-looking specimen, I'm not planning to collect them. Maybe a 3-cent, also.

Now, I'm thinking it would be neat to have one of each size of coin. It looks like there are 12 circulating coins (not counting the gold): Half-cent, large-cent, current cent, two cent, three cent, three cent silver, nickel, dime, quarter, half, dollar, new dollar. Maybe one more if you count the SBA and Sac dollars differently. It sounds like a good starting point.

 

You only missed two---Twenty Cent piece and Half dime.

Speedu

 

Ahh, thank you. How could I miss the half-dime?

I think that's what I'll do, start with one of each size, and then expand to one of each major type (lincoln cent, indian cent) and then even more (copper, zinc, steel lincoln cent), etc. Not too expensive, but fun. I already have some of what I'm looking for (large cent, indian cent, and a few others).

I want to get at least one nice St. Gaudens too.

One thing I was wondering, if the coin dealer charged me more than PCGS, did I get ripped off? He charged $38 for a 1937 MS64 5C. If he's ripping me off, I don't know if I want to buy from him.

 

A 1937 Buff nickel in MS64 has been selling for on Heritage (I couldn't find one that had sold this year...this is for 2005)...$29.00-$33---since that is a year old and since dealers almost always are a little higher you did fine.
This is one reason why I suggest you learn how to grade and serach out about the coins you want to buy---had you known about what they were going for you might have been able to talk him down a few dollars.

Speedy

 

The point I was trying to make in my example that probably didn't come out correctly is that there is no inherent reason why each $1 rise in the price of silver should necessarily equate into a $10 rise in the price of silver coins with 10X numismatic premiums. If the numismatic coins appreciate at the same rate as the bullion, then nothing has been gained in the investment sense by owning them - they must outperform bullion to become a worthwhile investment. I just want to make sure that your expectations are grounded in reality and remind you that the primary reason for buying such coins is to HAVE FUN, not make money.

 

I have been buying Silver and Gold in the form of bullion coins. The American Silver Eagles are hard to buy at close to spot. I have been paying $12 to $16. And now I have stopped buying silver.
Recently I picked up a few one tenth ounce AGE coins. A pawn shop in Providence, RI sold me a proof 2001
one tenth ounce for $75. And I bought a 2006 gold Eagle tenth oz. on eBay for $68.00.
Then I got a 2003 PCGS MS69 one tenth ounce gold eagle for $75 from a local dealer.
It's a good thing I like the looks of the American Eagles because the investment return just isn't there right now. So they will sit in a safe deposit box at the bank. I go "visit" them once in a while.

 

I've been told that the smaller the size of the the AGE (American Gold Eagle, just in case someone doesn't get the abbreviation) the larger the relative premium over the gold price. The prices at the Local Coin Dealers seem to reflect that.

 

Cloud,
That's true. But, I believe that the numismatic value will rise faster than the bullion value. As I said before, bullion is only a store of value, while numismatic coins should increase in value. The numbers back this up: since 1970, gold has increased at an annual rate of 7.84%, while the PCGS CU3000 index has increased at 12.05%. If gold increased at the same rate, it would currently be $2352 per ounce.

Victor,
You can buy "silver rounds" for quote close to spot, or old "face value" coins at very close to spot. The eagles, while they have a premium cost over bullion value, will retain this premium when you sell them, and since they have a small amount of numismatic value, may even beat it.

umtrr,
Yes, that's true, the smaller ones have a higher premium. This is true because there's basically a per-coin cost to mint them, so there's a fixed amount (not exactly but that's a way to think of it) added to each coin, no matter the size. That amount is relatively larger for a small coin. The prices you get when you sell them also reflect this.

 

Victor,
APMEX has good shipping rates, for a $1000 or more it's a flat $20. They also seem to have better prices than the the other ones you mentioned.

The NYS tax doesn't apply to bullion purchases over $1000.

I would imagine PCGS charges much less to just throw a coin in a slab, rather than have 3 experts look at it. Their re-slab fee is $5, and it'd probly be cheaper if you had a few hundred done.

 

I guess I should have bought the thing when it was $70. He actually had 3 of them. I hesitate at times when it is obviously a fantastic deal. I think it is part of my Scandinavian genes! When I was ready to go back to his table, the guy had packed up and was leaving the show.